Heidelberg Cement Posts Muted Q3FY13 Numbers

DSIJ Intelligence / 12 Feb 2013

Heidelberg Cement reported a muted set of Q3FY13 numbers resulting in the market participants showing a thumbs-down to the counter.

Heidelberg Cement reported a muted set of Q3FY13 numbers resulting in the market participants showing a thumbs-down to the counter. The stock of the cement company plunged down closing the yesterday lower by 3.42% to Rs 45.15 per share. The following table gives us the overall December quarter performance of the company:  

Particulars (Rs / Cr)

Dec-12

Dec-11

% change

Net Sales

25.68

25.82

-0.54

Other Operating Income

0.62

0.22

181.82

Total Income from operations

26.29

26.04

0.96

Cost of raw materials

70.38

68.29

3.06

Employee expense

26.18

22.09

18.52

Power & Fuel

74.02

61.99

19.41

Freight & Forwarding expense

38.68

36.41

6.23

Total Expense

26.26

25.39

3.43

Operating Profit

0.03

0.65

-95.38

Depreciation

0.82

0.85

-3.53

Interest Expense

0.3

0.11

172.73

Profit before tax

-1.09

-0.31

-251.61

Tax

0.35

0.13

169.23

Net Profit

-0.74

-0.18

-311.11

For the December 2012 quarter, the net sales of the company remained almost unchanged at Rs 26 crore while its loss widened on a YoY basis. The company reported a net loss of Rs 0.74 crore against a loss of Rs 0.18 crore in the similar period last year.

The company’s net loss increased majorly because of higher employee and Power & Fuel expenses, which increased by 18.52% and 19.41% to Rs 26.18 and Rs 38.68 crore respectively. Higher expenses lowered the operating profit of the company which decreased by 95% to Rs 0.03 crore against Rs 0.65 crore in the similar period last year. The operating profit margin of the company stands at a meagre 0.11% against 2.49% in the similar period last year.

Overall, we believe that the company posted a bad set of numbers for the quarter. On the valuation front, the company is available at a TTM Price to Earnings multiple of 19x, which we believe is on the higher end, considering some of the big cement players like Ambuja Cement (available at a TTM PE of 16x) and ACC (available at a TTM PE of 15x).

We believe that with disappointing December 2012 quarter numbers and with the stock available on the higher valuation, there is a possibility of downside risk on the counter. We would advise our readers to take a wait and watch on the counter.      

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